Stocks Gain With Commodities on U.S. Data, China Bets

Traders work on the floor of the New York Stock Exchange (NYSE) in New York. Photographer: Scott Eells/Bloomberg

June 27 (Bloomberg) -- Stocks rose, halting a four-day
slump in Europe and Asia, and commodities surged as growth in
U.S. home sales and durable-goods orders topped forecasts and
speculation grew that China will add to economic stimulus. The
euro weakened for a third day. Treasuries were little changed.

The Standard & Poor’s 500 Index advanced 0.9 percent to
1,331.85 at 4 p.m. in New York. The Stoxx Europe 600 Index added
1.4 percent and the MSCI Asia Pacific Index rallied 0.7 percent.
Energy shares led gains in the U.S. as oil climbed back above
$80 a barrel. Spanish and Italian 10-year bonds fell as German
Chancellor Angela Merkel reiterated opposition to joint euro-area debt. The euro lost 0.2 percent to $1.2468.

The 1.1 percent increase in orders for durable goods eased
concern that American manufacturing was faltering, while growth
in pending home sales added to evidence the housing market was
recovering. The China Securities Journal said the country may
introduce “more proactive” policies to ensure stable growth in
the world’s second-largest economy. European leaders prepared
for a two-day summit starting tomorrow.

“The economic data was encouraging,” said Walter Todd,
who oversees about $940 million as chief investment officer of
Greenwood Capital in Greenwood, South Carolina. “It’s important
to see that because most recently we’ve had weaker data here and
in China while Europe came back to the forefront. Any policy
moves out of China would certainly be welcomed. In addition,
it’s the end of the quarter and you tend to see some buying
around that time.”

Eight of the nine biggest gains in the S&P 500 were energy
companies, led by rallies of more than 6 percent in Cabot Oil &
Gas Corp., QEP Resources Inc. and WPX Energy Inc. JPMorgan Chase
& Co., Bank of America Corp. and Coca-Cola Co. climbed at least
1.7 percent for the biggest gains in the Dow Jones Industrial
Average, which jumped 92.34 points to 12,627.01.

Market Leaders

Monsanto Co., the world’s largest seed company, climbed 3.9
percent as earnings exceeded analysts’ estimates. Bristol-Myers
Squibb Co. advanced 1.7 percent after the maker of the blood
thinner Plavix doubled the size of its share buyback program.
Facebook Inc. dropped 2.6 percent after at least 17 firms
started to cover the social-networking company, with an average
analyst share-price estimate below its initial public offering
price of $38 a share.

An index of 11 homebuilders in S&P indexes surged 3 percent
and closed at the highest level in almost four years. The index
of pending home resales climbed 5.9 percent to 101.1, matching a
two-year high reached in March, after a 5.5 percent decline in
April, figures from the National Association of Realtors showed.
The median forecast of economists called for a 1.5 percent gain
in May.

Economic Data

Bookings for U.S. durable goods increased for the first
time in three months, the Commerce Department said. The median
forecast of 76 economists surveyed by Bloomberg News called for
a 0.5 percent gain. Excluding orders for transportation
equipment, which can be volatile, bookings for goods meant to
last at least three years advanced 0.4 percent.

Today’s housing and durable-goods data helped assuage
concern that the U.S. economic recovery was weakening.

“The U.S. does look better than Europe, other places in
the world, clearly,” Gregory Peters, chief cross-asset
strategist at Morgan Stanley, told Bloomberg Television. “We’ve
seen a lot of benefits from that, so a lot of flows into the
U.S. But I think the story is that investors are hiding out in
U.S. equities, U.S. risk markets, at a time when the U.S.
economy is slowing, we’re facing the fiscal cliff, and earnings
expectations are way too high.”

Stock Skew

Concern that Europe’s crisis will snuff out earnings growth
sent the cost of protecting against losses in the S&P 500 to a
five-year high. Puts protecting against a 10 percent decline in
the benchmark gauge for American equities cost 1.73 times more
than calls betting on a 10 percent gain, according to data on
three-month contracts compiled by Bloomberg. The price
relationship known as skew rose to 1.95 last week, the highest
level since July 2007.

The Federal Reserve reduced its estimate last week for
expansion in gross domestic product and U.S. consumer confidence
dropped for a fourth month in June. The S&P 500 lost 6.3 percent
from the end of March through yesterday, leaving it poised for
the first retreat in three quarters. Analysts forecast earnings
declined 1.1 percent in the second quarter, the first decrease
since 2009.

European Shares

The Stoxx 600 rebounded from a four-day, 2.8 percent
retreat as banks and energy companies led gains. Spain’s Bankia
SA and Italy’s Banca Popolare SC surged at least 4.8 percent to
help lead gains. Barclays Plc rallied 1.9 percent even after it
was fined 290 million pounds ($453.2 million) for submitting
false London and euro interbank offered rates.

Germany’s Merkel shut the door to joint euro-area bonds as
a means of lowering Spain’s borrowing costs, saying they are the
“wrong way” to achieve the greater European integration needed
to stem the debt crisis. Speaking three hours after Spanish
Prime Minister Mariano Rajoy made a plea for help from
tomorrow’s European summit, Merkel said that euro bonds, euro
bills and debt redemption funds are unconstitutional in Germany
and economically “wrong and counterproductive.”

‘Disorderly’

“At some point, the Germans are going to decide, ’do I
take the credit risk of backstopping Italian and Spanish debt in
exchange for some loss of national fiscal sovereignty by Italy
and Spain?’” Nouriel Roubini, the co-founder and chairman of
Roubini Global Economics, told Bloomberg Television’s
“Surveillance.” “In which case, the euro zone has a chance
to survive. Or otherwise this thing may become disorderly in the
next few months.”

Cocoa, lean hogs, sugar and corn rallied at least 1.4
percent as 15 of 24 commodities tracked by the S&P GSCI Index
gained, sending the index up 0.8 percent for a fourth straight
gain. The commodities gauge has rebounded after slumping to the
lowest level since October 2010 on June 21.

Natural gas trimmed earlier gains, trading up 0.3 percent
after rallying as much as 6.5 percent. The fuel has surged 10
percent in five days. The National Weather Service predicted
temperatures will be above normal east of the Rocky Mountains
through July 9, spurring demand for the power-plant fuel as air-conditioning use increases.